When an employment relationship ends, whether due to dismissal, resignation, or any other reason, one of the concepts that generates the most confusion is the final settlement. Knowing how to correctly calculate your final settlement is essential to ensure you receive exactly what you are legally entitled to, without leaving a single euro unpaid. In this article, we explain, clearly and practically, what a final settlement is, what it includes, and how you can calculate yours step by step.
What is severance pay and when is it due?
A final settlement is the document and payment that the employer gives to the employee when their employment contract ends. It includes the settlement of all outstanding amounts that the company must pay up to the last day worked. Whether you decide to leave or the company terminates the relationship, in both cases you are entitled to receive a final settlement.
It's important not to confuse final settlement with severance pay. Final settlement includes accrued but unpaid wages, while severance pay is a specific compensation for the termination of the contract, applicable only in certain circumstances. Both concepts can coexist, but they are distinct and must be calculated separately.
Components that make up the final settlement
To accurately calculate your severance pay, you need to identify each of its components. Most severance packages include the following elements:
1. Salary pending collection
These are the days in the current month that you have worked but have not yet been paid for. If, for example, your contract ends on the 20th of a month, you should be paid for those 20 days at a proportional rate based on your monthly salary.
Formula: (Gross monthly salary ÷ 30) × Number of days worked in the last month.
2. Unused vacation days
Any vacation days you have accrued during the current year but have not yet taken must be paid out in your final settlement. In Spain, by collective agreement or the Workers' Statute, employees are entitled to a minimum of 30 calendar days of vacation per year (or the number stipulated in the applicable agreement).
Formula: (Annual vacation days ÷ 12) × Months worked in the year − Vacation days already taken.
Once the remaining days have been calculated, they are multiplied by the daily value of your salary (including pro rata of extra payments if so established by your agreement).
3. Proportional part of extra payments
If your company pays extra payments (most agreements include at least two per year: in summer and at Christmas), you are entitled to receive the proportional part of the payments you have generated and have not yet received.
Formula: (Amount of the bonus payment ÷ 12) × Months worked since the last payment.
If the extra payments are already prorated in your monthly payroll, this section does not apply.
4. Overtime hours pending compensation
If you worked overtime that was neither paid nor compensated with time off, it must be included in your final settlement. The value of each overtime hour is established by the collective bargaining agreement or, failing that, cannot be less than the value of a regular hourly rate.
5. Other agreed concepts
Outstanding commissions, accrued bonuses, unpaid allowances, or other supplements listed in your contract or collective agreement must also be included in your final settlement. Review your regular payslip to ensure you don't forget anything.
Step by step: how to calculate your severance pay
Once the concepts are identified, the calculation is simpler than it seems. Follow this process:
- Consult your collective agreement: Specify the salary conditions, the number of extra payments, and the vacation days that correspond to your professional category.
- Determine your gross daily salary: Divide your gross annual salary (including bonuses) by 365 days. This figure will serve as the basis for calculating vacation days and outstanding days.
- Calculate the salary for the days worked in the last month: Multiply the gross daily salary by the number of days actually worked in the month the contract is terminated.
- Calculate your remaining vacation days: Apply the formula indicated above and multiply the result by your gross daily salary.
- Calculate the pro rata share of extra payments: If you don't have them prorated, add the proportional part generated since the last payment.
- Add up all the gross amounts: The sum of all the above sections gives the gross settlement.
- Apply the withholding taxes for Personal Income Tax and Social Security: The final settlement is subject to the same withholdings as your salary. The net amount is what you will actually receive.
Common mistakes when reviewing a severance agreement
Many employees sign their severance agreement without carefully reviewing it, which can result in significant losses. These are the most common mistakes:
- Do not include any outstanding vacation days: It is one of the most frequent oversights, especially when the termination occurs mid-year.
- Calculating the pro-rata share of extra payments incorrectly: It is necessary to check from what date each payment starts to be generated according to the agreement.
- Ignore the extras or add-ons: Transportation allowances, night shift allowances or productivity bonuses are also part of the base salary calculation in many collective agreements.
- Confusing severance pay with compensation: Signing the settlement agreement does not imply waiving a possible compensation for unfair dismissal if the situation so determines.
If you have any doubts about whether the calculation presented by the company is correct, it is highly recommended that you consult with a professional before signing anything. On our Vosseler Abogados blog, you will find more resources on labor law and work-related issues.
What happens if you disagree with the severance package?
You have the right to sign the settlement agreement adding the phrase "not in agreement" next to your signature. This does not mean you are waiving your right to receive the offered amounts, but it does indicate that you disagree with the sum, allowing you to make a claim later. Never sign a settlement agreement you disagree with without explicitly stating this reservation.
If your employer refuses to pay your severance or the amount is clearly incorrect, you can contact the Mediation, Arbitration, and Conciliation Service (SMAC) in your autonomous community as a mandatory step before taking legal action. In more complex cases, such as those involving workplace accidents or situations of particular vulnerability, having specialized legal advice makes all the difference. The case of Raúl, for example, illustrates this point: a serious workplace accident that continues to generate debate and highlights the importance of legal support in critical moments.
The importance of having legal advice on employment matters
Employment law is multifaceted, and every situation is different. The applicable collective bargaining agreement, the type of contract, the reason for termination, and seniority within the company are all factors that can significantly affect the final severance pay. An error in any of these areas could cost you hundreds or even thousands of euros.
At Vosseler Abogados, we have a team of labor law experts who can review your severance pay, advise you on whether the amount is correct, and assist you with any necessary claims. Our philosophy combines personalized attention with professional rigor, because we understand that behind every case is a person with real needs.
Before signing any document that ends your employment, take a few minutes to do your own calculations or request a professional review. A properly calculated severance package is the best way to close a chapter of your career with the peace of mind of having received everything you deserve.
